The Outlook for the Big Three Oil Majors

Now that we've got the quarterly reports of the "big three" integrated U.S. oil companies, it's a good time to take a quick look at where Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP) are and where we might want to invest in this mega-cap space.

If you're a steady reader of my columns, you know where I concentrate my efforts in parsing differences between the majors and in fact among all of the large-cap oil companies: in volume growth. Of course, my advantage is in bringing in the commodity outlook that few analysts can. The first driver of share price is clearly the crude price, and in other columns I've made clear that I believe we've seen the lows in oil prices for 2013, so we must look at energy as an overweight holding for our investing.

So there's a positive cycle in which a $100-and-higher crude price is affecting oil companies. Our job is to find the companies that have the most promising volume growth for 2013 and going forward.

In the three majors, we have an interesting mix of projects and some clear winners.

Conoco may represent the least compelling story of the three right now. It reported in line but guided lower on production for 2013 to growth of 3% to 7%. Its costs for finding and production are rising faster than anyone else's, and it's hard to list a new exciting project to drive its volume growth even past 2013. Despite its leading 4.5% dividend, it's the one I like the least.

Chevron also ultimately disappoints me, at least as a place I want to be in 2013. Its production for the fourth quarter of 2012 was stellar, and its margin on every barrel of crude it produces is better than that of any other major out there. Still, Chevron's growth for 2013 will be below what was expected, and its costs seem to be rising as well. All of the exciting projects that would grow volume are slow to be realized for 2013 -- Frade offshore in Brazil, Kitimat in British Columbia, the Angola liquefied natural gas project, Chinese projects -- all of these won't likely affect volumes until later in 2014. That's perhaps when I'd want to invest in them.

Finally, we have No. 1 – Exxon Mobil. This one has by far been my favorite of the U.S. majors for quite a while, and it had a great report for the fourth quarter, increasing production a stunning 8.4%. Its aggressive move into chemicals and liquids is paying off, and even downstream refining is making better money, although its assets are not in the best places to replicate the really fabulous results of the mid-continental and PADD 2 refiners. And the strongest new project in Canadian sands in Alberta, the Kearl project, is finally ready to go online. Add to this my belief that President Obama will approve the Keystone pipeline in March, and Kearl looks like the most exciting project around (estimated 4.2 trillion barrels!). At $90, Exxon is the best buy of the three, still.

And yet, even Kearl isn't enough to get me to add to my very long-term position in Exxon Mobil. I've talked about other oil exploration-and-production companies that I believe are even more exciting for 2013, considering their current share prices. If you're starting a position in what I believe will be a very, very good year for energy shares, that's an even better place to be than in any one of the big three.

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